Finding 1089526 (2023-003)

FINDING 2023-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY 2023 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context Recipients of COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) awards are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon the type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. Counties with a population that exceeds 250,000 residents are further required to submit annually a Recovery Plan Performance Report (RPPR). The RPPR provides the public and the Treasury with both retrospective and prospective information on the projects that recipients are undertaking or planning to undertake with program funding and how they are planning to ensure program outcomes are achieved in an effective, efficient, and equitable manner. The County was classified as a metropolitan county with a population that exceeds 250,000 residents. As such, quarterly P&E reports were to cover one calendar quarter and were to be submitted to the Treasury by the last day of the month following the end of the period covered. The annual RPPR was to be submitted to the Treasury by July 31, 2023. An employee of the Board of County Commissioners prepared and submitted the four required quarterly P&E reports during the audit period; however, there was no review or oversight process in place to prevent, or detect and correct, errors. Additionally, an employee of the Board of County Commissioners submitted the required annual RPPR during the audit period, which was compiled by a contracted vendor on the County's behalf. The vendor worked with the employee to get the necessary information to complete the report. Once complete, the report was provided to the employee, who then submitted the report without a review or oversight process in place to prevent, or detect and correct, errors. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls, which would include segregation of duties, over SLFRF reporting was not designed by the Board of County Commissioners in order to prevent, detect or correct, material noncompliance. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect management's statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Board of County Commissioners design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.